India is the latest country to get drawn into the South China Sea dispute. Earlier this month, Beijing told New Delhi that its permission was needed for India's state-owned oil and gas firm to explore for energy in two Vietnamese blocks in those waters. This follows reports of a Chinese vessel confronting an Indian Navy frigate off Vietnam in late July.

Vietnam quickly cited the 1982 United Nations Convention on the Law of the Sea to claim its sovereign rights over the two blocks in question. Hanoi has been sparring with Beijing over the South China Sea in the past year, so such a response was expected.

What's new is New Delhi not taking Chinese aggression in that region sitting down. It immediately decided to support Hanoi's claims. Last week, Indian Foreign Minister S.M. Krishna visited Vietnam and made it clear that its state-owned firm would continue to explore in the South China Sea. The display of backbone helped India strengthen its relationship with Vietnam. If China wants to expand its presence in South Asia and the Indian Ocean region, New Delhi's thinking goes, India can do the same thing in East Asia.

The linchpin of this eastward move would be Vietnam. Hanoi fought a brief war with Beijing in 1979 and has grown wary of the Middle Kingdom's increasing economic and military weight. That's why in some quarters of New Delhi, Vietnam is already seen as a counterweight in the same way Pakistan has been for China.

That's not to say good India-Vietnam relations wouldn't exist otherwise. Vietnamese have traditionally held Indians in high regard because of the latter's support for Vietnamese independence from France and their opposition to U.S. involvement in the country. And New Delhi formulated a "Look East" policy as early as 1991, to capitalize on East Asia's economic growth. But the rise of China has given this relationship a powerful strategicâ€”not to mention urgentâ€”dimension.

Both sides realize that a stronger bilateral relationship starts with economic ties. The two countries signed an agreement in 2003 in which they envisioned creating an "Arc of Advantage and Prosperity" in Southeast Asia. So they've been boosting trade, especially after New Delhi signed a free-trade agreement with the Association of South-East Asian Nations in 2009. The volume of bilateral trade now exceeds $2 billion.

Both sides could still do more to enhance economic cooperation. Bilateral trade is much below the potential, given that India and Vietnam are major emerging economies. The two countries also need to think creatively about expanding investment opportunities, especially in the energy, steel, and pharmaceutical sectors. This can be done by establishing stronger institutional mechanisms that review the economic relationship on a regular basis and take steps to enhance it.

New Delhi's abiding interest in Vietnam, though, is in the defense realm. It wants to build relations with states like Vietnam that can act as pressure points against China. With this in mind, it has been helping Hanoi beef up its naval and air capabilities.

Given that Vietnam and India use similar Russian and erstwhile Soviet defense platforms, New Delhi could easily offer defense technologies to Hanoi. Talks are ongoing for India to sell the BrahMos supersonic cruise missile, an Indo-Russian joint venture. Such arms could allow Vietnam to project regional power and improve deterrence against China.

The two nations also have stakes in ensuring sea-lane security, as well as shared concerns about Chinese access to the Indian Ocean and the South China Sea. Hence, India is helping Vietnam to build capacity for repair and maintenance of its defense platforms. At the same time, the armed forces of the two states have started cooperation in areas like IT and English-language training of Vietnamese Army personnel. The two are also sharing their experiences in mountainous and jungle warfare.

Naval cooperation, however, remains the focus. Here, Vietnam has given India the right to use its port of Nha Trang in the south; the Indian Navy has already made a port call. It is not entirely clear what the final arrangement would look like, but the symbolism of this is not lost on China.

The two countries potentially share a common friendâ€”the U.S. New Delhi has steadily built relations with Washington in the past decade, while Vietnam has been courting America as the South China Sea becomes a flashpoint. As these three countries ponder how to manage China's rise, they will be drawn closer together.

By lashing out against India for its dealings with Vietnam, China has shown it will try to deter strategic competitors from collaborating against it. But if both India and Vietnam stand firm, they could force Beijing to moderate its expansionist claims on the South China Sea and adopt a more conciliatory stance on other regional matters.